Top Cisco executive heads for private equity post

Analysts say Giancarlo's departure is a loss for tech bellwether

SAN FRANCISCO (MarketWatch) -- The departure of a top Cisco Systems Inc. executive, who was widely considered to be a likely heir to Chief Executive John Chambers, surprised some analysts who said the change raises questions about succession at the tech giant.

News that Chief Development Officer Charles Giancarlo, 50, is leaving Cisco
CSCO, -0.03%
to join private equity firm Silver Lake didn't appear to affect the company's shares, which were up more than 1% Friday morning.

But some analysts said Giancarlo's departure is a blow to the networking equipment maker.

Giancarlo will become a managing director at the firm's Menlo Park, Calif., office effective Jan. 1, Silver Lake announced. Cisco also announced his departure on Thursday.

Giancarlo was seen as instrumental in the company's business development initiatives and mergers and acquisitions strategy.

"Chambers was depending on him," analyst Roger Kay of Endpoint Technologies Associates said. "Chambers enjoys being CEO. He has indicated his intention to stay on, and so some of the stronger talent is drifting away. It's not as extreme as [Steve] Jobs at Apple Inc.
AAPL, +2.08%
but strong personalities have a way of alienating other strong personalities over time. Thus, the top guy is left with nothing but yes-men, who are incapable of doing what the top guy does."

Kay also said: "Something is up. Maybe the deal with Silver Lake was too good to turn down. Or maybe he was getting impatient for Chambers to step aside. Either way, it's a big loss for Cisco."

Analyst Crawford Del Prete of International Data Corp. said Giancarlo "brought a lot to Cisco in terms of expertise and leadership," but added he didn't think his departure was a major setback for the company.

"I think he's looking for that next challenge, and given John's commitment to stay at the company for the next three to five years, Charlie felt it was time," he said. "Cisco will be fine, and Charlie has put himself in a position to secure a great leadership role by moving to Silver Lake."

But analyst Shaw Wu of American Technology Research said Giancarlo is the second major executive to leave Cisco this year, after Mike Volpi, head of the company's routing and service provider businesses and veteran mergers-and-acquisitions chief, left to join the online video company Joost.

"One the surface, this is somewhat of a surprise, given his stature at Cisco and as he was widely seen as a likely candidate to succeed John Chambers," he said about Giancarlo's departure in a research note. "This leaves Cisco without a clear heir apparent."

"While we believe Cisco is at a size and scale where no one person is arguably important enough to impact the company, we view these senior departures as a slight negative," Wu said.

Chambers praised Giancarlo's contributions to Cisco, saying in a press release: "He has built a seasoned management team that has the strength and skills to execute against our technology vision."

In a prepared statement, Giancarlo said he was "confident Cisco will continue to build on its tremendous foundation, its strong markets and the quality of its people and management."

Cisco also announced it has made changes in the product development organization that Giancarlo had led.

Giancarlo joined Cisco in 1993 after the San Jose, Calif.-based company acquired Kalpana, a pioneer in Ethernet switching. He is known as one of the developers of the ATM and Switched Ethernet technologies.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.